The Pandemic Is Fueling A Real Estate Frenzy In Colorado. How Much Longer Will It Last?
The lack of options hit Ali Wasserman early on in the house hunting process.
It was spring of 2020. Armed with a $400,000 budget, the 26-year-old was determined to find a place to call her first home in Denver, even as the pandemic took hold around her.
But the first townhome Wasserman toured, which looked promising online, had no doors on any of the bedrooms. In another, the master suite was built using half-walls.
“It was terrible,” she said. “I was like, ‘I’m not paying 400 grand for half-walls and no doors.’”
The problem? A stunning lack of inventory to choose from. Wasserman’s realtor warned her that the number of homes on the market was less than a third of what it was the year before.
After months of searching, she expanded her search to the broader metro area and ended up in a newly-built townhouse in Aurora.
Fast forward to January 2021 and the inventory situation has only gotten worse. Across the state, buyers have snatched up homes at record rates, leaving local markets with historically low levels of houses and condos to offer as the year gets going.
In Fort Collins, the most recent data from the Colorado Association of Realtors shows the number of active residential listings is down 57% year-over-year.
Aurora has around 76% fewer homes to sell around the city’s median price point than it did a year ago. Overall inventory in Weld County is half of what it was at the start of 2020.
A number of economic forces continue to lure new buyers to the market even during the winter, a historically slower time for real estate sales.
Interest rates remain at ultralow levels, which gives people (especially first-time homebuyers) more buying power. And, realtors say, the pandemic is still making more people want to move.
“When people are stuck in their homes for work or school, they’re realizing they don’t like their homes,” said Alfredo Rodriguez, a realtor who works in the Denver Metro area.
This time last year, Rodriguez said his clients might be competing against five or six other buyers. Now it’s more like 20 or 30.
Competition is so stiff, some buyers are willing to overlook certain inspections just to get an offer in, he said. Offers that are several thousand dollars over asking price are quickly beat out by other, even higher offers.
“And that’s just after a weekend of being on the market,” Rodriguez said.
The frenzy, meanwhile, has also pushed sales prices higher all across the state.
Statewide, the median sales price for a single family home is $450,000, according to the latest data from CAR.
Larimer County saw its median sales price for a single family home jump about 5% to $440,000 in 2020. In Weld County, the median rose more than 7% to over $385,000, one of the strongest years on record. In Denver, it rose almost 10% to $535,000.
“It feels ridiculous,” said Kelly Moye, a Broomfield-based realtor who works in markets across Northern Colorado. “It feels like you can’t get to a property fast enough and offer high enough.”
The numbers are not lost on housing advocates, who worry about Colorado’s rising cost of living and the disproportionate economic impacts of the pandemic on lower-income residents.
Recent studies have shown the cost of homeownership in many Front Range metro areas is increasingly out of reach for many essential workers.
Noticing the trend, a group of local professionals in urban planning, economics, law and development formed the Colorado Housing Affordability Project last year, to outline and advocate for local and statewide policy changes to help the issue.
Their solutions include immediately legalizing accessory dwelling units (ADUs) in most large cities, banning local growth caps and reducing parking requirements for multi-unit developments, among other things to help increase supply of housing units.
But with the COVID-19 pandemic, political unrest and a host of other issues dominating the attention of local and state governments, housing policy is falling by the wayside, said Brian Connolly, a lawyer who volunteers with the project.
New housing developments also continue to face resistance from local residents, who worry about overcrowding and traffic in their communities.
“Maybe I’m just pessimistic with everything else going on right now, but I think it’s kind of a grim outlook in terms of the affordable housing issue if we don’t do something to change it,” said Connolly.
Many realtors and economists expect 2021 to be another solid year of price appreciation for Colorado homes, but not quite as high as 2020.
That’s because inventory is likely to increase as COVID-19 vaccines are distributed and the broader economic recovery speeds up. Mortgage rates are also expected to rise again in 2021, reducing many people’s buying power.
A smaller, but still sizable supply could come on the market as government forbearance programs —which have helped prevent a wave of foreclosures and evictions throughout the pandemic — expire later this year.
New home construction is likely to speed up in response to current demand as well, said Matthew Gardner, chief economist with Windermere Real Estate.
“Builders are realizing there’s a lot of pent up demand, but more importantly, they’re now looking at markets further out (from urban areas) because of the ability to work from home,” Gardner said, speaking during the company’s annual economic forecast in January. “It’s much needed because the number of homes for sale in America is woefully, woefully inadequate.”
People like Ali Wasserman, who bought her first home amid a less-than-ideal inventory situation, say other Colorado buyers should be ready to compromise.
Even if her new townhome in Aurora wasn’t the location she expected to end up, she said she’s happy with what she has.
It’s right near where she grew up, so she knows the area well. It has an extra bedroom and bathroom she’s renting out to help pay the bills. The fireplace and large basement are pluses too.
“Unfortunately, in this market, I don’t think anybody’s going to find exactly what they’re looking for in exactly the place they’re looking for,” Wasserman said. “I don’t regret my decision at all.”
Besides, she said, when restaurants and bars fully open back up again, she can afford to take an Uber to Denver every now and then.